The Top Six Logistics Issues Companies Will Face in 2018
Change is coming in dramatic ways to the methods and means by which companies transport their goods, with technology, purchasing trends, economics and environmental advancements playing major roles.
Zvi Schreiber, chief executive officer of LogTech company Freightos, in an interview with Sourcing Journal, offered his insight and outlook for many of the key logistics issues facing the apparel and textile industry in the year ahead.
1. Getting online
Whether its B2B or B2C, logistics companies are dealing with an online juggernaut.
Schreiber, who runs one of the world’s largest online marketplaces for international shipping, said he thinks a top goal of 2018 is “bringing the whole shipping industry online, ocean and air freight.”
“We had a report last year that said 2017 would be the year that freight forwarders would start to sell online, and that prediction has turned out to be true,” Schreiber said.
He noted that in December, DHL started providing air freight quotes on its website, and others like Delta Airlines have done so or said they would. Major ocean freight carriers such as Maersk and CMA SGM have announced plans to start selling online, as well.
Schreiber said the key benefits are speed and transparency.
At the same time, Schreiber said, “E-commerce is a big driver behind so many changes in logistics and shipping.”
DHL said this month that it’s introducing upgrades to its service capabilities, including additional flights, new customer applications and piloting new warehousing technologies that leverage robotics and augmented reality to increase productivity to meet increased demand from B2B and B2C e-commerce.
Travis Cobb, senior vice president of network operations for DHL Express, said peak season pickup and delivery volumes are forecast to be 26 percent higher year over year, and his unit is expanding weekend deliveries and adding to its courier network.
“We’re also expanding intercontinental aircraft capacity and facilities in major trade lanes,” Cobb said. “We also have a continued focus on improving last-mile delivery with more pick up and drop off locations, such as retail lockers and new retail locations.”
One of the biggest developments has been in the blockchain movement to provide a secure, efficient and transparent way to share data technology.
A consortium of Japanese businesses involved in global trade, including Mitsui O.S.K. Lines, teamed up to start a demonstration test to verify the applicability of blockchain technology as a way to streamline and upgrade cross-border trade operations.
By comparing against current operations, the test is intended to verify the effectiveness of blockchain technology for enhancing security and reducing the time required to settle cross-border trade transactions, discrepancies among related documents and administrative costs. Looking to commercialization, the technology will be evaluated for its viability in cross-border trade business operations.
UPS Inc. joined the Blockchain in Trucking Alliance, or BiTA, a forum for the development of blockchain technology standards and education for the freight industry. UPS said it sees the need to create industry standards and protocols to enable blockchain platforms to operate together with established technologies. In the future, blockchain standards and inter-company collaboration will support the logistics strategies that enable UPS customers to participate in global trade and finance.
UPS also wants to leverage blockchain technology to facilitate execution and visibility of trusted transactions between the company, its customers and government customs agencies. Blockchain, a digital database using blocks that are linked and secured by cryptography, can be used to keep record of any information or assets. This includes physical assets, like transportation containers, or virtual assets, like digital currencies.
Other companies throughout the logistics sector are working on independent blockchain projects. Shipping giant Maersk Line aims to digitize its trade data with help from software providers IBM Corp. and SAP.
3. Digital data
A study from McKinsey & Company, “Container Shipping: The Next 50 Years,” recommends that shipping companies invest in digital technologies to differentiate their products, disintermediation of value chains, improve customer service, raise productivity and cut costs.
Coupled with the introduction of more sensors, the better usage of the data that ships and containers generate would allow enhancements such as optimizing voyages in real time by taking into account weather, currents, traffic and other external factors, smarter stowage and terminal operations, and predictive maintenance.
Data could also improve the coordination of arrivals at port—a major benefit, since 48 percent of container ships arrive more than 12 hours behind schedule, wasting the carriers’ fuel and underutilizing the terminal operators’ labor and quay space, the study noted.
“Track and trace is a huge headache,” Schreiber said. “We need more good old-fashioned data integration, but also more interesting technological development.”
He cited, for example, tracking devises on each shipment and item similar to GPS technology, rather than the current ability to just trace the means of transportation that can be inconsistent.
In the area of sustainability, Freightos has launched an initiative that gives a carbon footprint calculation for each shipment. It includes a suite of free CO2 calculation tools enabling customers or third-parties to optimize route and mode selection with live international CO2 footprint calculations.
Schreiber said the initiative enables enhanced visibility of carbon emissions per shipment, continuing Freightos’ mission to introduce transparency to the opaque global shipping sector.
The use of alternative fuels in transport vehicles has major momentum. Ocean cargo giant CMA CGM signed an agreement with natural gas provider Total covering the supply of around 300,000 tons of liquefied natural gas (LNG) a year for 10 years starting in 2020. This will enable CMA CGM to meet its goal of launching nine container ships by 2020.
The use of LNG is a technological breakthrough that will yield significant benefits compared to heavy fuel oil, including up to 25 percent less carbon dioxide emissions, 99 percent less sulfur emissions, 99 percent less fine particles and 85 percent less nitrogen oxide emissions.
Mitsui O.S.K. Lines out to sea the MOL Truth, the fifth in a series of six 20,000 Twenty-Foot Equivalent Unit (TEU) container ships operated by MOL. The vessel adopts a host of advanced technologies to reduce its environmental impact. These include a low-friction hull paint, a high-efficiency propeller, a high-efficiency engine plant and an optimized hull shape. These features will reduce CO2 emissions 25 percent to 30 percent per container in comparison with MOL-operated 14,000 TEU-class vessels. The ship’s design also allows conversion to LNG fuel.
The twin ports of Los Angeles-Long Beach, the country’s largest port complex, approved a plan this fall to slash air pollution by encouraging the phase-out of diesel trucks in favor of natural gas, and eventually zero-emissions trucks and cargo-handling equipment, over the next 20 years.
Tesla’s unveiled its first all-electric big rig in November, and J.B. Hunt Transport Services and Walmart Stores quickly placed orders. The first highway-ready vehicles are due out in 2019.
This month, UPS placed a reservation for 125 of Tesla’s new fully-electric Semi tractors. The new tractors will join UPS’s extensive alternative fuel and advanced technology vehicle fleet, comprised of trucks and tractors propelled by electricity, natural gas, propane and other non-traditional fuels.
Photo credit: Tesla UPS and the New York State Energy Research and Development Authority announced that new technology will be developed to convert UPS package delivery vehicles from diesel to electric. UPS and Unique Electric Solutions will design, build, test and make the conversions. The project supports New York Gov. Andrew M. Cuomo’s aggressive goal to reduce greenhouse gas emissions 40 percent by 2030 by replacing diesel vehicles with clean technology.
UPS operates more than 8,300 alternative fuel and advanced technology vehicles worldwide. The company’s fleet includes electric, hybrid electric, hydraulic hybrid, compressed natural gas, liquefied natural gas, propane and lightweight fuel-saving composite body vehicles. UPS also noted that it uses millions of gallons of lower-carbon footprint renewable diesel and renewable natural gas in its fleet.
Air freight giant FedEx, which saved more than 153 million gallons of jet fuel in 2016, said improved environmental sustainability results in the years ahead will come through the application of new technologies, including the use of alternative fuels such as LNG.
5. Freight rate volatility
Schreiber noted that ocean rates remain “unsustainably low, but are quite volatile.”
The World Container Index assessed by Drewry, a composite of container freight rates on eight major routes to and from the U.S., Europe and Asia, was down 2 percent to $1,133.96 per 40-foot container in a mid-December report, and was 20 percent below the same period in 2016.
The average composite index of the WCI, assessed by Drewry for year-to-date, was $1,466 per container, which was $128 lower than the five-year average.
“Carriers are having a tough time, also because of over overcapacity,” Schreiber said. “While air cargo is having a strong period, peaking at prices we haven’t seen in a while.”
6. The Panama Canal
The Expanded Panama Canal, now 15 months old, is exceeding expectations and is impacting trade routes for importers and exporters.
The Panama Canal Authority said in the 2018 fiscal year that began Oct. 1, the canal, which underwent a $5 billion, 15-year renovation and expansion, is projected to accommodate about 13,000 vessels, including 2,335 Neopanamax vessels that will carry a record 429.4 million tons through the locks.
With faster transit times becoming even more important, the ability of shippers to decrease time on the ocean has become strategic and helps keep costs down by having goods arrive closer to the end consumer.
Hackett Associates said West Coast imports are expected to grow only 0.3% during the first half of 2018 over the same period in 2017, while on the East Coast, which has been gaining market share from the West Coast, volume should grow 1 percent